Business Finland USA, Inc. v. Colangelo
23-07036
Bankr. S.D.N.Y.May 19, 2025Background
- Business Finland USA, Inc., a subsidiary of the Finnish government, employed Jaana Colangelo to manage funding requests and bank transactions for its New York office.
- Colangelo was entrusted with access to the company’s Chase bank account, from which she misappropriated more than $4 million between 2011 and 2017 for personal expenses (e.g., vacations, home renovations, jewelry).
- Colangelo falsified bank statements to conceal her theft from both her employer and its parent company during routine audits.
- Business Finland won partial summary judgment in New York Supreme Court on faithless servant and constructive trust claims, including forfeiture of over $500,000 in compensation and imposition of a constructive trust on Colangelo’s home.
- Colangelo filed for Chapter 7 bankruptcy days before the state court trial on remaining claims was to begin; Business Finland then sought to have its debt declared nondischargeable under § 523(a)(2), (4), and (6) of the Bankruptcy Code.
- The Bankruptcy Court addressed Business Finland's summary judgment motion to determine if the debt is excepted from discharge based on prior state court findings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether collateral estoppel precludes relitigation of fraud and misappropriation issues | State court already found Colangelo misappropriated funds via fraud and disloyalty | Colangelo claims she reimbursed herself for legitimate expenses known to supervisors | Debtor had full, fair opportunity in state court; issues precluded from relitigation |
| Whether the debt is nondischargeable under § 523(a)(2)(A) (fraud) | Debt arises from money obtained by false pretenses and fraud, shown in state court | Debtor asserts some expenses were legitimate reimbursements | Elements for nondischargeable fraud met; Business Finland Claim is excepted from discharge |
| Sufficiency of Debtor’s opposition/rebuttal | Debtor argues business expenses justified her transfers and reimbursements | Debtor reiterates explanations rejected by the state court | Arguments already raised and rejected in state court; cannot be relitigated |
| Need to consider remaining § 523(a)(4) and (6) claims | Alternative nondischargeability justifications presented | N/A | Not addressed, as § 523(a)(2)(A) claim suffices for relief |
Key Cases Cited
- Grogan v. Garner, 498 U.S. 279 (1991) (collateral estoppel applies in bankruptcy discharge exception proceedings)
- City of Binghamton v. Whalen, 141 A.D.3d 145 (N.Y. App. Div. 2016) (faithless servant doctrine: employee engaging in disloyal acts forfeits compensation)
- William Floyd Union Free Sch. Dist. v. Wright, 61 A.D.3d 856 (N.Y. App. Div. 2009) (repeated disloyalty warrants full forfeiture of compensation)
- Liu v. Chen, 133 A.D.3d 644 (N.Y. App. Div. 2015) (elements for imposition of constructive trust)
- Buechel v. Bain, 766 N.E.2d 914 (N.Y. 2001) (collateral estoppel bars relitigation of issues decided against a party in prior litigation)